Photograph by Nathaniel St. Clair
I went on CNBC’s Squawk Box this week to talk about a new proposal from Senator Bernie Sanders to put tax penalties on corporations with extreme gaps between their CEO and worker pay. This is an issue I’ve been working on for many years.
In fact, a dozen years ago, in August 2007, I had also appeared on Squawk Box to talk about solutions to our runaway CEO pay problem. Back then I was particularly critical of the massive payouts going to Wall Street executives like then-CEO of Countrywide Financial, Angelo Mozilo. Rising foreclosure rates on his company’s sub-prime mortgages were already causing jitters. But when I questioned Mozilo’s $43 million paycheck, the CNBC host and other guests nearly bit my head off.
“Mozilo built that company from nothing!” I remember one of them shouting into my earpiece. “His shareholders believe he walks on water!”
As we know now, Mozilo had built his massive fortune on nothing but a house of cards. Four months after this CNBC show, Countrywide didn’t even exist.
Mozilo was just one of many bonus-chasing Wall Street executives whose recklessness drove the U.S. economy off a cliff. In the aftermath of that meltdown, I had hoped that big corporations and their shareholders would solve the broken executive pay system on their own. Why would anyone continue to tolerate a system that is all about short-term gains for those at the top — regardless of the consequences for the rest of us?
But more than a decade later, the myths that propped up Angelo Mozilo remain prevalent.
Others on the CNBC show this week reiterated the widely debunked theory that the free market determines pay. Up and down the corporate ladder, they claimed, employees are paid what they’re worth — even if that results in vast pay divides, with CEOs making hundreds of times more than their employees.
I got a little impatient with this point of view, as you can see in the video excerpt posted by CNBC.
The discussion made me even more convinced that the time is now for public policy to rein in these persistently extreme CEO-worker pay gaps. Corporations will not change their practices on their own.
